The Indian Rupee (INR) weakened on Monday, breaking a two-day winning streak as sluggish economic growth, persistent Foreign Institutional Investor (FII) outflows, and the Reserve Bank of India’s (RBI) recent rate cut pressured the currency lower against the U.S. dollar.
Despite the downturn, RBI intervention through U.S. dollar sales may help limit further losses. Additionally, a decline in crude oil prices—beneficial for India as the world’s third-largest oil consumer—could provide some support to the INR. Traders are also awaiting India’s Trade Balance data, set for release later in the day.
Meanwhile, in the U.S., Federal Reserve officials Patrick Harker and Michelle Bowman are scheduled to speak, though with U.S. markets closed for President’s Day, limited volatility is expected.
Indian Rupee Under Pressure Amid Economic Concerns
India’s Wholesale Price Index (WPI) inflation eased slightly to 2.31% in January, down from 2.37% in December, and fell short of market expectations of 2.50%.
Market analysts remain cautious about domestic equity performance. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that a sustained market rally is unlikely unless the U.S. dollar weakens and U.S. bond yields decline, which could encourage FII buying.
On the trade front, U.S. President Donald Trump recently stated that Indian Prime Minister Narendra Modi had offered discussions on tariff reductions and increased imports of U.S. oil and gas in a bid to narrow the trade deficit between the two nations.
US Data Overview
The U.S. economy showed mixed signals last week. Retail Sales fell by 0.9% in January, missing expectations of a 0.1% decline and reversing the 0.7% increase (revised from 0.4%) in December. However, Industrial Production exceeded forecasts, rising 0.5% month-over-month in January, compared to a revised 1.0% increase in December and beating the 0.3% estimate.
USD/INR Outlook: Bulls in Control, Sideways Movement Expected
The USD/INR pair maintains a bullish outlook, with prices holding above the 100-day Exponential Moving Average (EMA) on the daily chart. However, further consolidation may occur as the 14-day Relative Strength Index (RSI) hovers around the midline.
Key Technical Levels:
Resistance: Immediate resistance is at the 87.00 psychological level. A breakout above this level could push the pair toward an all-time high near 88.00, with the next target at 88.50.
Support: Initial support lies at 86.35 (February 12 low), followed by 86.14 (January 27 low). A breach of these levels could open the door for further downside moves.
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